By: Mark Fitzgerald
In a stunning victory for a dissident shareholder group in its bitter proxy battle with Media General Inc., stockholders at the Richmond, Va.-based company’s annual meeting elected all three Harbinger Capital Partner representatives running for Class A director seats against a management-backed slate.
Harbinger said its slate received between approximately 57% and 68% of votes cast. Media General did not release a tally, but said preliminary results suggest the dissident representatives had won. Both sides noted that the final results will be available in several days.
Media General has a dual-class stock structure that ensures control by holders of Class B stock, which is not publicly traded and is controlled mainly by Bryan family members and other company insiders.
Harbinger began its proxy battle several weeks ago, hammering away at Media General management for its slumping stock price, for allegedly spending too much on recent acquisitions of a television station cluster and social network Web site.
Harbinger has urged Media General to consider leaving the Tampa Bay market, where its Tampa Tribune and NBC-affiliated television station have been hurt badly by the Florida housing collapse. Media General two weeks ago offered buyouts to approximately half of its 1,300 Tampa Bay area employees.
In presentation to stockholders and analysts, Media General argued that Harbinger is only interest in a short-term profit at the expense of long-term growth. It also said the dissident nominees were inexperienced in running newspapers or broadcast.
Harbinger bought up about 18.2% of outstanding Class A stock in the weeks before the annual meeting. Its slate was supported by Mario J. Gabelli, who controls an approximately 22% stake. Two proxy advisory firms recommended withholding votes from the management slate, or supporting two of the three Harbinger nominees.
The Harbinger representatives elected are Eugene I. Davis, J. Daniel Sullivan and F. Jack Liebau Jr.
“We believe these individuals will bring experience, judgment, independence and accountability to the board,” Harbinger Vice President and Director of Investments Joseph Cleverdon said in a statement. “It is now in the interests of Media General and all of our fellow stockholders to move past this proxy contest and focus on rebuilding stockholder value.”
In a memo to Media General employees, President and CEO Marshall N. Morton said the election of the three was a “disappointment.”
“I want you to understand that Harbinger cannot, under any circumstances, forcibly gain control of Media General, and that the three new directors cannot gain control of our nine-member Board,” he wrote.
“We will listen with courtesy to the ideas of the new directors, but, frankly, I believe they are going to have to prove themselves worthy of their places on our Board before they will be able to earn the confidence of the remaining directors,” Morton added.
In a presentation at the annual meeting, Morton said there is reason to be optimistic about the company’s prospects in the coming year. The company expects to generate $40 million in political advertising because of its media holdings in such campaign battleground states as Ohio, Florida, and Virginia. He noted, too, that its NBC affiliates will be carrying the Summer Olympic Games, which is expected to generate advertising revenues of $13 to $14 million.
“Yes, the current economic headwinds are slowing our progress to a certain extent,” Morton said. “Yes, we will be challenged by those who may not seek to act in the long-term best interest of Media General. But we are going to continue to make progress, and we are going to continue to be the leading provider of news, information and entertainment in our markets using whatever platforms our audience and advertisers want.”
Also at the meeting, six Class B directors were re-elected: J. Stewart Bryan III, Media General’s chairman; O. Reid Ashe, Jr.; Diana F. Cantor; Marshall N. Morton; Thompson L. Rankin; and Coleman Wortham III.